For-Profit Education Stocks Rise as GOP Opposes Tighter Rules

Representative John Kline, the
Republican who will head the House Education Committee, said
he opposes tighter rules for the for-profit education
industry, sending company shares higher.

“I would push back really hard against a bill that might
come out of Chairman Harkin’s committee,” Kline, of Minnesota,
told Reuters, referring to Senator Tom Harkin, the Iowa Democrat
who heads the Senate education committee. Harkin has
commissioned a government probe of for-profit colleges and held
hearings on their sales tactics, use of government funds and
program quality.

For-profit colleges have come under growing scrutiny as
Secretary Arne Duncan prepares industry regulations and Senate
and House committees examine how for-profit colleges mislead
applicants, target veterans and register student default rates
at least double those of traditional universities. Republicans
are raising objections to tougher regulations as they prepare to
take control of the House of Representatives in January.

“It looks like this may just be the first public
confirmation of a Republican agenda that we’ve fully
anticipated: that he would oppose Democratic legislation to
regulate the space,” Jarrel Price, an analyst with Height
Analytics in Washington, said in a telephone interview of
Kline’s comments.

Opposes Rule

Kline views a regulation proposed by the Education
Department as unnecessarily harmful to for-profit colleges and
their students, said Alexa Marrero, a spokeswoman for the
lawmaker.

The gainful-employment rule would restrict colleges from
receiving federal aid if data showed their graduates have poor
records for repaying government loans. Kline called the proposed
rule “confusing and complex,” in an Aug. 2 letter. The rule
would take effect in 2012.

“The best approach to protect students and taxpayers is
for greater transparency across all sectors,” Marrero said.
“He has concerns about arbitrary proposals that would limit
students’ higher-education options, as the proposed gainful-
employment regulation is currently drafted.”

Bridgepoint, based in San Diego, rose 89 cents, to $17.32,
in New York Stock Exchange composite trading. Strayer, based in
Arlington, Virginia, increased $7.88, to $154.07, in Nasdaq
Stock Market composite trading.